Amazon.com drops Illinois affiliates in the wake of internet tax

Last Thursday, Illinois Governor Pat Quinn signed into law the "Mainstreet Fairness Bill" and immediately imposed new taxes on all online retailers with business partners in the state. For the Democrats in charge, passing the largest tax hike in the Prairie State's history this past January, adding the equivalent of $1,600 per year to the average personal income tax bill, was apparently not enough of an assault on those of us who still - albeit foolishly - live in financially and politically bankrupt Illinois.

Rather than place the burden for cleaning up the state's budgetary mess only on physical residents of Illinois, Governor Quinn and a totally complicit legislature (Republicans included) have now forcefully enlisted the help of innocent outsiders. The new legislation requires internet stores, even those without a single outlet in the state, collect and remit taxes for all sales made through their Illinois-based affiliates. Doing so purportedly levels the playing field between brick-and-mortar businesses who must tax purchases and their untaxed online competitors.

But more than merely increase the cost of living for Illinoisans in yet another way, the law also has unfortunate consequences for non-profit and philanthropic organizations. Immediately following the bill's passage Amazon.com notified its Illinois affiliates that as of April 15th their contracts with the Amazon Associates Program will be terminated.

The all-volunteer group I lead, the Chicago Young Republicans, received this notice, making us one of the thousands of affiliates unable to use online Amazon advertisements as a fundraising tool. No longer will purchases linked from our website made on Amazon.com (and any of our other advertising partners that inevitably choose to end relations in Illinois) support our 1,000-member organization.

While discontinuing the advertising program has relatively little total impact on Amazon in particular - affiliates contribute less than 10% of the site's overall sales - it matters greatly to businesses dependent on out-of-state internet retailers for their income or, as in our case, for help fundraising.

In the rush to placate and prop-up those who cannot compete with the online marketplace, Springfield has now dealt a serious blow to the 9,000 affiliates in Illinois who are estimated to lose at least 25% of their income when online outlets end their contracts in the state. Holding residents captive to a high sales tax is one thing; declaring outsiders pay up as well at the expense of local business is another. But then again, perhaps this equitable distribution of fiscal misery is the real "fairness" referenced in the law's title.

I can't wait for this one to go to the US courts.

This has already gone all the way to the Supreme Court. Unless a business has a physical presence in the state, you cannot make them charge sales tax. States like Illinois and California are trying to argue that the in-state affiliates provide that nexus that allows them to tax companies like Amazon. So when these laws pass, Amazon simply ends the affiliate program for that state. It doesn't hurt Amazon, doesn't help the state, but is devastating to those affiliates that need the revenue from the advertising...

RE: Unless a business has a physical presence in the state, you cannot make them charge sales tax.

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Well, this is where Obama and his Democratic friends come in to support their Democratic buddies in blue states like Illinois and elsewhere (Illinois will be the pioneer as this is where Chicago and Rahm Emanuel are ).

And if it ever goes to Court anywhere in the US, you can be sure Obama and his justice department will invoke the time-honored “Commerce Clause”.

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